Escorts jumped 8.33% to Rs 1765.90 after the company said that Kubota Corporation will increase its stake in the company.
"As part of this Kubota Corporation shall increase its equity stake in Escorts by subscribing to new equity shares proposed to be issued by Escorts and shall become a joint promoter along with existing promoter of Escorts," the company said in a statement.
Escorts will issue 9,363,726 equity shares through a preferential issue to Kubota at an issue price of Rs 2,000 per equity share aggregating Rs 1,872.74 crore, subject to shareholders' and necessary regulatory approvals.
Post Preferential allotment, Kubota's investment in Escorts will be 14.99%. Kubota Corporation held 1.22,57,688 shares (representing 9.09% stake) in Escorts as on 30 September 2021.
Further, Kubota will also make an open offer to the public shareholders of Escorts to acquire upto 26% of the share capital in accordance with SEBI Regulations.
Current promoter group (Nanda Family) are not selling any shares of the company, Escorts said.
With a goal of making Escorts the exclusive vehicle of business in India and simplifying the corporate structure, Escorts and Kubota have decided to take necessary steps to evaluate and consider the feasibility of merger of Kubota's subsidiaries in India where Escorts is also a partner [i.e., Kubota Agricultural Machinery India (KAI) & Escorts Kubota India (EKI)] into Escorts, subject to necessary approvals.
The board of Escorts has agreed to evaluate and consider the feasibility of cancellation of all the residual equity stake of Escorts held by the Escorts Benefit and Welfare Trust (besides the pending capital reduction) without payment of any consideration and the merger of Escorts Finance into Escorts, subject to necessary approvals.
To reflect the spirit of joint partnership, upon completion of this transaction, the name of the company shall be changed to 'Escorts Kubota', subject to regulatory approvals.
Kubota intends to have Nikhil Nanda engaged in his individual capacity as a non-employee with the proposed designation of senior managing executive officer and general manager of value-innovative farm and industrial machinery strategy and operations of Kubota, besides a proposal to induct him as a director on the board of Kubota's European business holding company, Kubota Holdings Europe B.V., Netherlands. There will be no remuneration payable to him for these services.
Nikhil Nanda, CMD, Escorts, said: "We are delighted to embark on a journey of global leadership in agri-machinery in partnership with Kubota Corporation. I am pleased to announce the enhancement of Kubota's current holding in the company. This will enable both companies to enhance the value they have created by leveraging each other's strengths be it in technology, market access, manufacturing processes or engineering excellence.
With this Escorts is positioned to become an institution that will serve Indian and global fanners for decades and centuries. While Escorts is known for its stronger India presence with proven strengths in frugal engineering and manufacturing, Kubota brings world-class processes and global reach and expertise. The transaction will catapult Escorts to a different level of expertise, size and growth."
The transaction is subject to customary regulatory and other approvals and closing conditions.
The Escorts Group is an Indian engineering company that operates in the sectors of agri-machinery, construction and material handling equipment, and railway equipment.
The company reported 23.1% fall in standalone net profit to Rs 176.7 crore on a 1.4% rise in revenue from operations to Rs 1,662.3 crore in Q2 FY22 over Q2 FY21.
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